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SEC to shine light on executives' pay

"Excrescence" is the word that comes to mind when I read about the $686 million we stockholders paid to one man -- Lee Raymond, the chief executive of Exxon Mobile -- over the past 13 years.

Coincidentally, the people of Alaska are now struggling to collect a final $100 million for the damage caused by the Exxon Valdez oil spill 17 years ago. They have so far collected $800 million; this last $100 million is part of an agreement that left the final settlement open-ended.

Exxon, not surprisingly, is objecting to the payment. It would rather give more money to Raymond, and undoubtedly will.

The fundamental problem I have with paying a chief executive an egregious amount of money is the inherent oxymoron that it presents.

Paying the top person hundreds of millions implies that he or she is indispensable. If Raymond has been doing his job, there should be 10 people lined up behind him ready and able to step in. If this is not the case, he is guilty of gross mismanagement for not grooming successors and shouldn't be paid more than a few million dollars.

There is a direct cause-and-effect relationship between excessive executive pay and the money we will wind up with at retirement.

Every time we make a deposit into our retirement accounts, a portion of it is being squandered if not stolen. If corporate directors are deemed to be fiduciaries representing the sole interests of company stockholders, then they should be subject to class-action suits when they award compensation that is off the charts.

Our spineless mutual fund managers are partly to blame because they have the power to vote against management, but excessive compensation never bothered them because they enjoy it themselves in the world's most profitable industry.

The Securities and Exchange Commission has just closed the comment period on its proposed rules for disclosure of executive pay in company annual reports. Shining light on what has been kept largely a secret would be a step in the right direction.

Basically, the proposal calls for a present value calculation of whatever salary and future promises are bestowed upon an executive in any given year.

The term "present value" means that we value, in today's dollars, the cost of an obligation we are promising to pay in, say, 10 years.

If money compounding at 7.2 percent doubles every 10 years, a promise to pay someone $10,000 10 years from now has a cost to us today of $5,000 (because that is all we have to set aside today to have the $10,000 when it is due and payable).

Another part of the proposal is to force disclosure of any executive perquisite costing more than $10,000. This would flush out all those other extravagances chewing up the money that could otherwise be compounding in our retirement plans.

Shedding light on what have been the hidden costs of executive compensation is the first step in solving the problem. After all, there are still great people in America's boardrooms who are capable of embarrassment if they knew their votes would see the light of day.

Armed with the SEC's disclosure efforts, there may be enough politicians who become one-issue candidates and get swept into office by a fed-up electorate, based solely on their promise to limit executive compensation.

In public companies, the limit could be 50 times that of the lowest paid employee. That's not far from what it was 20 years ago, and not much less than what it is in foreign countries today.

If people such as Raymond (or United Healthcare's William McGuire, who just received $1.6 billion in pay) need to make an honest fortune, they can do it like everyone else has to: Convince some investors or borrow some capital, start a company, and work like a pig. Don't steal the money from those of us whose best shot at a decent retirement is a systematic investment in America's public companies.

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